Important questions to ask when buying a business
Here are some pointers of questions to ask the seller when looking into buying a particular business.
• The first and most crucial question to ask is why is the seller selling? The immediate response (watch the body language) to such a direct question will be quite revealing.
• Has the seller offered to give you a handover period after the sale to help with the transition, and have you discussed payment for their services during the handover?
• Make sure you request to look over the certified financial statements of income, cash flow and balance sheets for the last three years. If you plan to borrow from a bank to purchase the business, the bank will want to see them.
• Ask to see the company’s (and not the owner’s personal) tax returns for the past three years. The bank will need this information as well.
• Request a copy of all documents of all outstanding creditors like accounts payable, property and equipment leases. Again the bank will require this.
• See if you can pick up anything about the quality of customer relations at the business? Is there good rapport between the business and customers?
• Have you gathered anything about the relationship between the business and its suppliers?
• Find out about the conditions of the working environment. Are there any hazardous situations or is this a well-kept workplace? Once you have handed over it will be your responsibility to make sure it is a safe place to work for the employees.
• Lastly, find out about the conditions of existing fixed assets, for example, office equipment, machinery and vehicles. Does the existing staff (if any) demonstrate good maintenance and cleanliness of company property?
Finally for a comprehensive list of over 1000 questions to ask a business seller refer to our page at http://www.business-sale.com/nresourcediligence.html
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